A rights issue is when a company offers its existing shareholders the option to buy additional shares, usually at a price set for the issue and often below market value. When shareholders exercise this option, the company receives cash (bank). The shares are issued with a nominal value, so the accounting entry credits Share Capital for the par value of the new shares, and any amount received above par is credited to Share Premium. If the issue price equals the nominal value, only Share Capital is credited. So the correct approach is to record the cash received as Dr Bank, and credit both Share Capital and Share Premium for the amount received. This reflects both the increase in share capital at par and any premium earned on the new shares. If there’s no premium, only Share Capital would be credited. The other descriptions don’t fit: a rights issue is not an option to sell existing shares, and a bonus issue transfers reserves to share capital rather than raising new funds; issuing to new investors at market price describes a different kind of share issue, not a rights offer to existing shareholders.

Auditor independence matters because shareholders rely on the audit to provide an unbiased view of the financial statements. When the auditor is independent, their assessment isn’t influenced by management or other interests, so the audit opinion can be trusted as credible and objective. This independence helps ensure that material misstatements or fraud would be identified and reported, giving shareholders confidence that the numbers reflect reality rather than a management-friendly presentation. The other ideas don’t fit because maximizing audit fees would threaten independence, trying to influence management decisions would compromise objectivity, and supervising the board isn’t the auditor’s role.

Controllable costs are expenses a manager can influence in the short term through decisions and policies. Commission to sales personnel is a controllable cost because management can set or adjust the commission rate or structure to affect sales performance. In contrast, rates to the local authority are typically fixed charges set externally and not easily changed in the short run. Interest on borrowings depends on existing debt terms and market rates, and while refinancing is possible, it isn’t a routine short-term control. Depreciation follows asset cost, useful life, and accounting policy, so it isn’t something adjusted month to month. Therefore, the controllable cost shown is the commission to sales personnel.

Under accrual accounting, an expense is a cost incurred in the ordinary course of business and is recognized in the period it helps generate revenue, regardless of when cash is paid. A loss is a decrease in economic benefits arising from events outside normal operating activities, such as asset impairment or selling an asset for less than its carrying amount. This option fits best because it clearly separates normal operating costs from losses caused by non-operating events, and it gives concrete examples like impairment or a loss on the sale of an asset. It also aligns with how some expenses (like depreciation or bad debt expense) are recognized even if no cash is paid in that moment, and how losses can be non-cash or occur from transactions outside ordinary operations. Other statements are misleading because expenses are not solely cash outflows, and losses are not restricted to a single cash event; they can be non-cash impairments or involve unusual transactions beyond normal operations.